Hagen M. Pruemm, RICP®

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Weighing a Wider Range of Health Plan Options

The Affordable Care Act (ACA) does not require small businesses with fewer than 50 full-time employees to offer health insurance. Still, many would like to do so, in part to stay competitive in a tightening job market.

It is often difficult for small businesses to find affordable health coverage. For companies with 3 to 199 employees, the average annual premium for family coverage was $17,615 in 2017.1

In response to an executive order issued by the president, the U.S. Department of Labor is easing restrictions on association health plans (AHPs), which could make it easier for small employers and sole proprietors with shared interests to join forces and buy insurance as a group.

Association Health Plans

Under the new rule, AHPs will be permitted to serve employers in a city, county, state, or multistate metropolitan area regardless of industry, or in a particular industry nationwide. The Congressional Budget Office estimated that up to 4 million people could switch their coverage to AHP plans by 2023.2

An AHP may have more bargaining power and can spread risk among a larger pool of employees, which can help lower premiums. In addition, AHPs don’t have to meet ACA rules requiring coverage for all 10 essential health benefits (such as maternity, prescription drug coverage, hospitalization, and mental health care).

AHP plans must cover pre-existing conditions, however. They will also be subject to the same consumer and health-care anti-discrimination protections that apply to large businesses.

ACA-Compliant Plans

Small businesses with 1 to 50 employees can still purchase comprehensive small-group health insurance that meets ACA standards through the Small Business Health Options Program (SHOP). Employers must have an office or worksite in a state to use that state’s SHOP and must offer coverage to all full-time employees. Businesses with fewer than 25 employees may receive a tax credit of up to 50% of premium costs for SHOP plans only.

Self-employed individuals and others without access to group health plans can buy individual coverage from state-based exchanges. Consumers can compare plans online, and families with incomes up to 400% of the federal poverty level may be eligible for tax credits that reduce premiums. (Subsidies are not available for AHP plans.) Information about ACA-compliant health plans for individuals and small businesses can be found at healthcare.gov.